Fertilizer enterprise Potash Corp. of Saskatchewan, Inc. (POT) lowered its fiscal 2008 earnings outlook, citing softness in demand for crop nutrients due to uncertainty in world economy.
The company cut its fiscal 2008 earnings forecast to around $10.75 per share, which is 10% below the midpoint of the company's previously indicated forecast range.
According to Potash, weaker fourth-quarter sales volumes in all three nutrients, reduction in potash volumes to higher netback spot markets and lesser prices and margins in the company's nitrogen and phosphate segments led to the downward revision. The company added that the above adverse effects were partially offset by a 1% reduction in consolidated reported corporate income tax rate.
The company expects total potash sales volumes for the year to be below 9 million tonnes, with potash gross margin more than triple compared to the prior year.
Lately, Potash said a 2-million production would be restricted, commencing from January, to match production for satisfying market demand. At present, the company anticipates that 2009 potash volumes would be similar to slightly above 2008 levels, with a strong final three quarters in the subsequent year.
Potash is of the view that annualizing estimated fourth-quarter per-tonne potash prices alone could shove 2009 realizations to about $200 per tonne, higher than those for full-year 2008. The company noted that the 2009 realizations would not include price increases achieved by Canpotex2 for first-half 2009 shipments to Korea and Japan or upcoming contract settlements with China and India for 2009.
Selling prices for nitrogen and phosphate have declined sharply, hurt by increased levels of nitrogen and phosphate at the time of financial crisis, together with severe decline in raw material input costs. Consequently, the company adjusted fourth-quarter volumes and margins downward.
Currently, Potash sees fiscal 2008 nitrogen gross margin to be above year-ago levels by 35%, and 2008 phosphate segment gross margin to be about 2.5 times higher than 2007 levels.
Even though the company expects a slow start to 2009 for all three nutrients, it believes the universal production holdbacks will significantly constrict the markets when demand returns, which Potash expect to be during the second-quarter of 2009.
Shares of POT closed Thursday's regular session at $74.22, down $5.88 or 7.34%, on a volume of 13.31 million shares.
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